Monumental Life Ins. Co. v. U.S. Fidelity and Guar. Co.

• Decision Date: 01 September 1992
• Docket Number: No. 433,433
• Citation: 617 A.2d 1163,94 Md.App. 505
• Parties: MONUMENTAL LIFE INSURANCE COMPANY v. UNITED STATES FIDELITY AND GUARANTY COMPANY, et al. ,
• Court: Court of Special Appeals of Maryland

Page 505

94 Md.App. 505

617 A.2d 1163

MONUMENTAL LIFE INSURANCE COMPANY v. UNITED STATES FIDELITY AND GUARANTY COMPANY, et al.

No. 433, Sept. Term, 1992.

Court of Special Appeals of Maryland.

Jan. 8, 1993.

John Amato, IV (Goodman, Meagher & Enoch, on the brief), Baltimore, for appellant

James M. Brault (Albert D. Brault and Brault, Graham, Scott & Brault, on the brief), Rockville, for appellee, Reliance.

Jonathan L. Abram (Karen M. Hardwick and Hogan & Hartson, on the brief), DC, for appellee, California.

(John R. Pennallegon, David J. McManus and Smith, Somerville & Case, on the brief), Baltimore, for appellee, USF & G.

(Gary C. Duvall and Miles & Stockbridge, on the brief), Towson, for appellee, U.S. Fire Inc.

Argued before WILNER, C.J., and ALPERT and ROSALYN B. BELL, JJ.

ALPERT, Judge.

In this case, Monumental Life Insurance Company, appellant, brought a declaratory action against four other insurance companies (the appellees herein) alleging that the various appellees were obligated to indemnify Monumental for costs and fees it had incurred while litigating a certain claim with a third party. In granting summary judgment for the appellees, the lower court denied all coverage to Monumental. Monumental now appeals, asking us to address ten issues related to its various policies. We shall affirm.

BACKGROUND

At its heart, this case is simply about indemnification: Monumental Life Insurance Company ("Monumental") contends that any or all of the four appellees herein, all of which are other insurance companies ¹, are obligated to indemnify Monumental for costs and fees it incurred while litigating a prior claim with a third party, Peoples Security Life Insurance Company ("Peoples"). The facts that gave rise to both (1) the present litigation (Monumental v. USF & G et al ) and (2) the underlying "third party" litigation (Peoples v. Monumental ) may be summarized as follows:

A. The Underlying Litigation: Peoples v. Monumental

Peoples and Monumental are both large, competing "home-service" life insurance companies which sell their various life insurance policies through individual agents; the agents, in turn, call on their customers at their homes and businesses.

In September, 1982, Monumental hired as an Executive These, as well as numerous other alleged departures of Peoples' employees to Monumental, began to concern Peoples ³. A series of letters and conversations between the two companies ensued. Included among these was a letter dated November 30, 1983, from William P. Gregg (President, Capital Holding Corporation ⁴) to Leslie B. Disharoon (Chairman, Monumental). This letter contained the following language:

                Vice President B. Larry Jenkins 2.  Larry Jenkins had been previously employed as the President and Chief Executive Officer ("CEO") of Peoples.   Approximately one month later, Monumental hired as an Agency Vice President Ronald J. Brittingham.   Brittingham had been previously employed as a field Vice President at Peoples.   In June, 1983, Monumental hired a third officer from Peoples, Willard (Gene) Hines, who left Peoples to become a consultant with Monumental
                

This will confirm the substance of Tom Simons' [Chairman and CEO of Capital Holding Corporation] conversation with you [Disharoon], in which he indicated that we have observed a substantial effort on the part of Monumental to induce Peoples' employees to terminate their employment and join Monumental. Based upon those observations, we have conducted a more thorough investigation of those activities. That investigation has exposed substantial evidence of an extensive campaign by Monumental to hire Peoples' employees. This evidence includes the fact that Monumental has hired approximately 25 Peoples' employees in the last five months.

In addition to the dramatic volume of that activity, the investigation also revealed a startling number of wrongful We believe that those activities are unethical. In addition, we are advised that they provide grounds for litigation against Monumental and the individual employees involved. As you can well imagine, we cannot allow them to continue.

actions, including the use by some of your employees of confidential information that was obtained during their tenure as Peoples' employees, and the misrepresentation of information allegedly obtained by such Monumental employees during their employment by Peoples.

Accordingly, we are making this final effort to resolve this problem without formal action. However, if we receive any further evidence that your employees are persisting in their pirating of Peoples' employees, I will instruct counsel to commence litigation and will also consider filing charges of unethical conduct against the appropriate parties under the auspices of industry trade associations. I deeply hope that such action will not be required, but recognize that swift, decisive action on your part will be required to avoid it. * * * *

In addition, pursuant to a letter dated December 16, 1983, from Larry Jenkins (then Chairman and CEO of Monumental) to Thomas Simons (Chairman and CEO of Capital Holding Corporation, as aforementioned), Monumental indicated as follows:

At your request, we are willing to come to a mutual understanding concerning our field personnel hiring practices and yours. * * * * As we discussed by phone, our proposal is this: [wherein Jenkins stated four proposed terms]. * * * *

In making this proposal, we expressly deny all accusations which have been made about improper acts on our part with respect to Peoples or its field personnel. We have not engaged in any unfair competition. The understanding reached above includes any future work of Gene Hines and any other people we may use.

With this settlement reached between us, we understand there will be no need for litigation between Monumental and Peoples on the matter.

If I have correctly expressed our understanding, please acknowledge.

As a result of, inter alia, the above letters and conversations, Monumental and Peoples, by letter dated January 17, 1984, agreed to a five-month hiring moratorium.

After this moratorium ended, Monumental hired as a Regional Sales Vice President Thomas Jenkins, a fourth Peoples' officer. As a result, after further discussion and amid threats of litigation, the parties negotiated a second, more complete agreement that was memorialized by a letter dated September 13, 1984. By this letter agreement (and subject to a few delineated exceptions), the parties reciprocally agreed, inter alia, (1) to a one-year moratorium on the hiring of each other's employees, (2) to a three-year moratorium on the recruiting of each other's employees, (3) not to use any of the other's proprietary information, nor to make any material misrepresentations about the other, and (4) to release mutually each other from claims resulting from conduct that occurred before September 13, 1984. (This September 13, 1984 letter agreement shall hereinafter be referred to as the "Agreement.") The Agreement also provided for a dispute-resolution procedure culminating in binding arbitration.

Despite this Agreement, Monumental allegedly continued to recruit officers and agents from Peoples. Indeed, from 1983 through 1986, inclusive, Monumental was alleged to have hired 61 of Peoples' managers and 222 of its agents, and to have rewritten approximately 10,000 of its policies. Additionally, Monumental was alleged to have told Peoples' policyholders, inter alia, that (1) Peoples was "going broke," and (2) Peoples could not afford to pay claims, or cash surrender values, on its policies.

On August 1, 1986, Peoples filed in the United States District Court for the Middle District of North Carolina, an Count 1 sought rescission of the parties' Agreement based on fraudulent inducement;

                eleven count complaint against Monumental, Larry Jenkins, Brittingham and Thomas Jenkins.   The following sets forth the relief sought by Peoples
                

Counts 2 through 4, inclusive, alleged breaches of fiduciary duty by the respective, individually named defendants;

Count 5 sought recovery for unlawful appropriation of trade secrets and confidential information;

Counts 6 and 7, respectively, sought recovery for tortious interference with contract, and tortious interference with business relationships;

Count 8 sought recovery for unfair or deceptive trade practices;

Count 9 sought recovery for unjust enrichment;

Count 10 sought recovery for a civil RICO violation; and,

Count 11 sought recovery for defamation ⁵.

On March 20, 1987, on motion filed by Monumental, Peoples' suit was transferred to the United States District Court for the District of Maryland. Shortly thereafter, on April 23, 1987, Peoples filed an Amended Complaint which (1) added Hines as an additional defendant, (2) added, as a new Count 5, a breach of fiduciary duty against him Monumental then moved, pursuant to the parties' Agreement, to have the parties' claims submitted to binding arbitration. Peoples resisted that effort, contending that the Agreement itself was null and void for having been fraudulently induced. The United States District Court for the District of Maryland (Joseph Howard, J.) denied Monumental's motion (and therefore set the case in for trial), after which Monumental filed an interlocutory appeal to the United States Court of Appeals for the Fourth Circuit. On appeal, the circuit court, by opinion dated February 10, 1989, reversed the district court's ruling and determined that, indeed, Peoples' entire claim (including the issue as to fraudulent inducement) was subject to binding arbitration ⁶.

individually, and (3) added some supplemental factual allegations.

On March 15, 1989, Peoples filed its ten count "Demand for Arbitration." Peoples' Demand contained essentially the same contentions as had their federal court complaint except that the Demand (1) did not contain the individual tort count of defamation, and (2) added one new claim for relief. Peoples...